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A remark by Chuck LeBeau about trading with the trend has stayed with me. He
speaks of the actual strength of a trend as opposed to merely its direction.
Entry strategies (pullbacks in his view) should be tailored to both direction
and strength, he says. This makes perfect sense to me.
Here are some initial thoughts. Perhaps you can help me to arrive at some kind
of "hierarchy" of trendiness, or call it a classification, or a taxonomy,
consisting of both direction and strength. For convenience, I'll describe only
long trades.
I. General direction, long term:
EMA(21) > EMA(55)
II. Trend picks up steam:
EMA(13) > EMA(21) > EMA(55)
III. Strong:
EMA(8) >EMA(13) > EMA(21) > EMA(55)
IV. Somewhere between II. and III. the ADX(13/14) usually starts rising. From
what I've seen, a rising ADX at any level generally means business:
ADX(13) > Ref(ADX(13),-1)
V. Very strong trend: (this is where Linda Bradford's "Holy Grail" and such
kick in)
ADX(13) > Ref(ADX(13) and
ADX(13) > 30
Almost forgot:
Very little direction (but don't fall asleep at the wheel):
ADX(13) < say, 12-15 and has been bumbling along down there for a while (hard to
quantify for me to date)
Use a different method? Got a simpler way? Simpler, yeah, that sounds right!
I look forward to hearing from you.
Best regards,
Philip
P.S. I'll probably be cross posting some version of this to reach non-metastock
users.
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